Note

Note: This is a copy of an actual email that was sent out to subscribers on Thursday, May 25, 2006. The information is contained in the body of the email, not on the Web site. The covered writer illustrates the opening of positions and when the writer closes a position, that information is also sent to subscribers. The examples are educational in that the writer is practicing what is being preached on a daily basis.

From: The Covered Writer [mailto:rlcoveru@wavecable.com]
Sent: Thursday, May 25, 2006 12:15 PM
To: 'Covered Writer'
Subject: LEXR May Closed Position

Please see commentary below:

The Covered Writer

The information presented in this email massage for educational purposes only and no mention of a particular security constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transactions, or investment strategy is suitable for any specific person. You further understand that the Covered Writer will not advise you personally concerning the nature, potential, value of suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information available in this communication may be deemed to be investment advice, such information is impersonal and not tailored to investment needs of any specific person. Past results or current transactions are not necessarily indicative of future performance.


			Systematic Covered Writing
			… more than just covered calls …


			Closed Position The Position Tracker



	The position listed below was closed on May 25, 2006. The data in the Position Tracker looked as listed in the table
	below, prior to the position being closed. What the writer is looking for is the difference between E1 and H1. Once
	the difference is significant, then the writer looks at the status of the position (B5 to C5) and notices that it is 'Continued'.

	It is a pleasure for The Covered Writer to demonstrate the ability of SysCW to generate income in less time when the
	market is increasing. Many investors resist going into long term investments due to a perceived loss of control of their
	holdings for a long period of time. That is simply, not true. Notice cell D-5 indicates that the position sold was a Jan 2008
	LEAP appearing to tie our hands in LEXR for more than two years. With the stock nearly doubling in value the Coverered
	Writer looks to see if the position can be closed while retaining the premium and put the dollars to work in another position.

	Note that in the Closing Position data that more than 75% of the premium was retained, the term was reduced to 13 months,
	our investment was freed up to go back to work and an interest free of several hundred dollars was our hands for a year.

	It just makes you proud to be an American!

	The Existing Position Data

					Stock	Cash	Total Cash	Current
Row	Date	Status/Strategy		Position	Investment	Generated	Generated	Value
	A	B	C	D	E	F	G	H
1	29-Apr-05	Initial Stock Purchase		Buy 400 LEXR @ 4.55	($1,827.00)			$3,587.00
2				Lexar Media, Inc.
3	29-Apr-05	Initial Call Option		Sell four '06 Jan $5 calls @ 1.20	Rolled 11/09/05	$467.97
4	9-Nov-05	Buy Back & Roll Out		Buy four Jan $5 calls @ 2.65		($1,072.00)			X
5	9-Nov-05	Continued Trade		Sell four '08 Jan $5 LEAPS @ 3.80		$1,507.93			X
6		Cash in Hand	49.47%				$903.90

	See below . . .
	The writer then adds three rows above row 7. The math for closing the position is entered as the amount it will cost
	to close the option in F6, which is -(Ask price times Shares plus Commissions). Next the proceed that will be received
	when the stock is sold is entered in E7 (Bid times Shares minus Commission). The net result of buying and selling the
	stock is entered in F7 (F7 = E7+E1). As soon as the writer hits enter, the approximate result of the trade will be in
	column G. If the math works . . . The actual filled amounts are entered and the table is updated as indicated.

	The Closed Position Data
					Stock	Cash	Total Cash
Row	Date	Status/Strategy		Position	Investment	Generated	Generated	Annualized
	A	B	C	D	E	F	G	H
1	29-Apr-05	Initial Stock Purchase		Buy 400 LEXR @ 4.55	($1,827.00)
2				Lexar Media, Inc.
3	29-Apr-05	Initial Call Option		Sell four '06 Jan $5 calls @ 1.20	Rolled 11/09/05	$467.97
4	9-Nov-05	Buy Back & Roll Out		Buy four Jan $5 calls @ 2.65		($1,072.00)
5	9-Nov-05	Continued Trade		Sell four '08 Jan $5 LEAPS @ 3.80		$1,507.93
6	25-May-06	Buy LEAPs to Close Option		Buy four '08 Jan $5 LEAPS @ 4.60		($1,843.00)
7	25-May-06	Sell Stock to Close Position		Sell 400 LEXR @ 9.01	$3,602.00	$1,775.00
8	25-May-06			Net Cash Gain			$835.90	Annualized
9	391	Days		Net Percentage Gain			45.75%	42.71%

	Again . . . This position was closed on May 25, 2006. The total cash generated (G8) is the auto-Sum of F3 though F7.
	Below that, in G9 the return percentage for the period is calculated by divided G8 by minus E1. Next we want the
	annualized percentage. First calculate the duration in days in A9. A9 is equal to A7 minus A1. This will show up as a
	date . . .activate A9 by left clicking and then reformat the cell to 'General' using the Format drop down menu. This will
	change the figure to the number of days between A7 date and A1 day, which is the duration of this closed position.
	To annualize the return, click H9 and type =G9/A9*365


	Commentary:		This position was in place for over a year. This means the annualized gain is 'real' in
			that nothing has to be repeated in order to achieve the gain. The covered writer has
			been trading LEXR stock since 2004 and continues to do so.

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN STOCK OR ANY OTHER EQUITY. THE INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY. THERE IS NO GUARANTEE THAT SIMILAR TRANSACTIONS CAN BE EXECUTED IN THE FUTURE. INVESTING IN THE STOCK MARKET INVOLVES RISKS, DO SO ONLY WITH A KNOWLEDGE AND UNDERSTANDING OF THE RISKS INVOLVED!
The information provided above is for informational purposes only, and no mention of a particular security constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction, investment strategy is suitable for any specific person. You further understand that the Covered Writer will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information available on this website may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Always remember that past results are not necessarily indicative of future performance.
These are the terms of use. Why are they here? Because the examples provided are real. The transactions actually took place. The dates are real, the positions are real. Some transactions will have been executed on the day you receive the email. What you are agreeing to, is the fact that in no way is it being suggested that you can, or should, enter a similar position. Why? Because that would be providing investment advice and the Covered Writer is not authorized to do that. There is also no guarantee that similar transactions could be executed at any time in the future. Only licensed brokers are allowed to provide investment advice. Therefore, you are agreeing that the preceding example was provided for 'educational purposes' for the sole purpose of illustrating the Systematic Covered Writing strategies.
Thank you!

SYSTEMATIC COVERED WRITING
Copyright © 2006. All rights reserved.
Revised: 05/29/06